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Maricunga progress and WA asset demerger

Lithium Power International 4 May 2022 Update
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Lithium Power International

Maricunga progress and WA asset demerger

Quarterly update

Metals and mining

4 May 2022

Price

A$0.73

Market cap

A$255m

A$1.38/US$

Net cash (A$m) at end March 2022

10.6

Shares in issue

349.1m

Free float

100%

Code

LPI

Primary exchange

ASX

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(16.5)

9.4

171.4

Rel (local)

(14.3)

6.3

160.7

52-week high/low

A$0.98

A$0.18

Business description

Lithium Power International’s main asset is its 51.6% interest in the Maricunga lithium brine project in Chile. Subject to securing a funding package, the first stage of the project is expected to produce 15.2ktpa of high-grade lithium carbonate, starting from 2026. LPI also owns two early-stage exploration lithium projects in Western Australia, which it plans to demerge by end CY22.

Next events

Fastmarkets – Lithium Supply & Markets conference 2022

27–29 June

Analyst

Andrey Litvin

+44 (0)20 3077 5700

Lithium Power International is a research client of Edison Investment Research Limited

Lithium Power International’s (LPI’s) Q322 activities report suggests continued progress on its 52%-owned Maricunga lithium project in Chile. The company has also confirmed its plans to demerge its Western Australia (WA) lithium assets by the end of CY22. We have updated our estimates slightly to bring them in line with the reported cash spend. Our valuation increases to A$1.1/share, due to the implied lower forecast project equity dilution. The planned lithium assets spin-off should crystalise additional value for shareholders.

Year end

Revenue (A$m)

PBT*
(A$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

06/20

0.0

(12.7)

(4.94)

0.0

N/A

N/A

06/21

0.0

(6.0)

(2.16)

0.0

N/A

N/A

06/22e

0.0

(9.6)

(2.52)

0.0

N/A

N/A

06/23e

0.0

(5.3)

(1.45)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items.

Maricunga project update

Following the release of the revised 15.2ktpa BFS in early 2022, LPI is working with Worley and Bechtel to update the EPC proposals for the project, aiming to obtain the final proposal at around mid-2022. According to LPI, Mitsui has advanced its due diligence process and is likely to progress with a non-binding off-take agreement. The company reported additional third-party interest from potential partners. LPI has also initiated further product tests with the project’s technical engineering partner GEA Messo, targeting to produce up to 10kg of battery-grade carbonate. A final investment decision on the project is expected in Q4 CY22.

WA lithium assets spin-off

The company has confirmed its intention to spin-off its WA lithium assets by the end of the year. The demerged assets will be listed on the ASX as Western Lithium, with shares distributed among the current LPI shareholders on a pro-rata basis. LPI’s WA lithium assets are early-stage, pre-resource hard rock deposits that are adjacent to the currently producing lithium operations. LPI has also reported net cash of A$10.6m at end Q322. We have updated our cash flow estimates slightly to bring them in line with the reported cash spend and expect end FY22 net cash of A$9.1m (versus A$12.9m before), mainly due to the higher project spend in Q3.

Valuation: Supportive lithium prices

Our valuation of LPI increases from A$1.02 to A$1.1/share, thanks to the higher LPI share price, which implies lower estimated project equity dilution. We do not attribute any value to LPI’s WA lithium assets due to their early stage and expect the proposed demerger to unlock additional value for LPI shareholders. Despite the current equity and commodity market weakness, the LPI shares remain well supported by the resilient lithium prices, favourable long-term lithium market fundamentals and the company’s continued progress on the Maricunga project.

Exhibit 1: Financial summary

A$'000s

2020

2021

2022e

2023e

June YE

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

0.0

0.0

0.0

0.0

Operating costs

(2,942.3)

(2,448.0)

(3,552.0)

(3,250.0)

EBIT from continuing operations

 

 

(2,942.3)

(2,448.0)

(3,552.0)

(3,250.0)

Share of JV losses/profits

(3,786.9)

(1,967.3)

(3,000.0)

(2,000.0)

Net financing costs

183.6

8.2

0.0

0.0

Forex

(6,203.2)

(1,573.2)

(3,000.0)

0.0

Profit Before Tax

 

 

(12,748.8)

(5,980.3)

(9,552.0)

(5,250.0)

Tax

0.0

0.0

0.0

0.0

Profit After Tax

 

 

(12,748.8)

(5,980.3)

(9,552.0)

(5,250.0)

Minority interests

(95.7)

(57.3)

183.0

0.0

Discontinued operations

(319.2)

(191.1)

1,530.3

0.0

Net income

 

 

(12,972.2)

(6,114.1)

(8,204.7)

(5,250.0)

Average Number of Shares Outstanding (m)

263

283

325

362

EPS (c)

 

 

(4.94)

(2.16)

(2.52)

(1.45)

Dividend, c

0.00

0.00

0.00

0.00

Revenue growth (%)

N/A

N/A

N/A

N/A

Gross Margin (%)

N/A

N/A

N/A

N/A

EBITDA Margin (%)

N/A

N/A

N/A

N/A

Normalised Operating Margin

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

29,300.8

32,696.3

36,471.3

54,068.5

Equity investments

25,074.9

28,594.9

32,794.9

49,892.2

PP&E

26.4

24.2

24.2

24.2

Exploration assets

4,199.4

4,077.2

3,652.1

4,152.1

Current Assets

 

 

7,391.8

6,802.0

9,335.9

5,585.9

Cash

7,141.6

6,280.7

9,131.2

5,381.2

Receivables

74.7

16.3

16.3

16.3

Other

175.5

188.4

188.4

188.4

Assets held for sale

0.0

316.7

0.0

0.0

Current Liabilities

 

 

(336.0)

(359.1)

(404.2)

(404.2)

Creditors

(293.8)

(322.2)

(322.2)

(322.2)

Short term borrowings and leases

(42.2)

(36.9)

(82.1)

(82.1)

Long Term Liabilities

 

 

0.0

0.0

0.0

0.0

Net Assets

 

 

36,356.5

39,139.3

45,402.9

59,250.2

Minority interests

(187.1)

(183.0)

0.0

0.0

Shareholders' equity

 

 

36,543.6

39,322.3

45,402.9

59,250.2

CASH FLOW

Operating Cash Flow

(13,067.9)

(6,171.4)

(8,021.7)

(5,250.0)

JV contribution

3,786.9

1,967.3

3,000.0

2,000.0

Forex

6,503.3

1,479.6

3,000.0

0.0

Other

853.5

382.2

(148.1)

0.0

Net operating cash flow

 

 

(1,924.3)

(2,342.4)

(2,169.7)

(3,250.0)

Payments for JV capital

(5,173.5)

(6,524.7)

(7,200.0)

(19,097.3)

Exploration

(1,202.2)

(205.8)

(810.0)

(500.0)

Equity financing

100.0

7,789.6

11,765.0

19,097.3

Other

0.0

452.6

1,235.1

0.0

Net Cash Flow

(8,199.9)

(830.7)

2,820.3

(3,750.0)

Opening net debt/(cash)

 

 

(15,341.5)

(7,141.6)

(6,280.7)

(9,131.2)

FX and other

0.0

0.0

0.0

0.0

Closing net debt/(cash)

 

 

(7,141.6)

(6,280.7)

(9,131.2)

(5,381.2)

Source: LPI, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Lithium Power International and prepared and issued by Edison, in consideration of a fee payable by Lithium Power International. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Lithium Power International and prepared and issued by Edison, in consideration of a fee payable by Lithium Power International. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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